Inside: Dispatches from the War on Hiring

It is not an exaggeration to describe the recent efforts of the federal government to restrict certain hiring practices as a “war.” But a counterattack has been launched against those efforts, and it does not appear that employers, courts or even other state governments will willingly surrender. Here are a few developments to bear in mind.

The latest war began in 2012, when the Equal Employment Opportunity Commission (EEOC) issued the Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 2012 (“2012 Guidance”). The EEOC recommended as a best practice that employers not ask about criminal convictions on job applications, and that if and when they do make such inquiries, the inquiries be limited to convictions for which exclusion would be job related for the position in question and consistent with business necessity. The EEOC concluded that to establish a criminal conduct exclusion was job related and consistent with business necessity, an employer needs to show its policy operates to effectively link criminal conduct and its dangers with the risks inherent in the duties of a particular position.

In Peoplemark(PDF), the United States Court of Appeals for the 6th Circuit upheld a $751,942.48 award against the EEOC in a hiring discrimination case. The EEOC had sued Peoplemark, a staffing agency, based on what the EEOC claimed to be a company-wide policy of refusing to hire convicted felons. The EEOC based its claim upon the statement of the company’s vice president and associate general counsel who had told the EEOC such a policy existed. The EEOC alleged that policy adversely affected African American applicants who tend to experience much higher rates of criminal conviction than the general population.

During the course of the litigation, Peoplemark presented the EEOC with irrefutable evidence that, notwithstanding the representation of its associate general counsel, there was no policy against hiring convicted felons. Undaunted by that evidence, the EEOC maintained its lawsuit for another year. Eventually, it agreed to voluntarily dismiss the lawsuit.

Peoplemark sought over $750,000 for attorneys’ fees and expert witness fees it had expended after it had proven it did not have the allegedly discriminatory policy. The 6th Circuit upheld an award in that amount, finding it had been “unreasonable to continue to litigate the Commission’s pleaded claim because the claim was based on a companywide policy that did not exist.”

In Pro Pak Logistics, a federal district court awarded an employer $189,113.50 in attorneys’ fees in response to a lawsuit filed by the EEOC. In awarding attorneys’ fees the court found: The EEOC filed suit in 2009 over alleged discriminatory practices from October 2002 through June 2004; the employer had closed its facilities; it was uncertain those individuals who had allegedly been discriminated against could be identified; and the EEOC brought its action at a time it was clear there was no manner in which the employer could comply with remedial provisions since both the facilities and the class no longer existed.

In Kaplan, the EEOC sued a group of educational institutions, claiming their use of credit reports in the hiring process had an unlawful disparate impact on “black” applicants. The EEOC’s theory had at least one major flaw: Its statistical expert could not provide reliable statistical evidence of discrimination. The EEOC could not reliably determine the race of applicants in the absence of any evidence from the employers who did not retain race data on applicants. Therefore, because the EEOC could not present admissible evidence showing that the use of credit reports caused the exclusion of applicants because of their membership in a protected group, it could not establish a prima facie case of disparate impact discrimination and the court granted the employers’ motion for summary judgment.

Another landmark loss for the EEOC occurred in the Freemancase. Freeman employs over 3,500 full-time and 25,000 part-time and seasonal workers. Having experienced problems with embezzlement, theft, drug use, and workplace violence by employees, Freeman began conducting background checks on applicants.

The types of background checks performed varied with the nature of the job sought. For many positions, only a criminal history investigation was at issue. For those positions that had access to financially valuable items or information, a credit history review was added. In all instances, the following application disclaimer was made:

“A conviction does not automatically mean you will not be offered a job. What you were convicted of, the circumstances surrounding the conviction and how long ago the conviction occurred are important considerations in determining your eligibility. Give all the facts, so that a fair decision can be made.”

Freeman limited its consideration of convictions to those that occurred within seven years of the application date. Thereafter, a multi-step evaluation process was used by Freeman to review all of the information obtained. The EEOC did not challenge any of the specific criteria or procedures, but merely alleged Freeman’s policy of conducting criminal and credit background checks, as a whole, produced a disparate impact on protected classes.

Freeman’s motion for summary judgment was granted by the federal district court. The court stated:

“Indeed, any rational employer in the United States should pause to consider the implications of actions of this nature brought upon by such inadequate data. By bringing actions of this nature, the EEOC has placed many employers in the “Hobson’s choice” of ignoring criminal history and credit background, thus exposing themselves to potential liability for criminal and fraudulent acts committed by employees, on the one hand, or incurring the wrath of the EEOC for having utilized information deemed fundamental by most employers.”

The State of Texasfiled a lawsuit (PDF) against the EEOC seeking injunctive and declaratory relief on the grounds the 2012 Guidance “purports to preempt the State’s sovereign power to enact and abide by state-law practices.” Texas argues the EEOC has sought to prohibit blanket “no felons” hiring policies, when Texas has legitimate safety and job-related reasons for such policies. It claims the EEOC Guidance unlawfully forces state agencies into an untenable position: the agency must either violate state and local laws that prohibit the “individualized assessment,” the EEOC requires and consider convicted felons for teaching and public security jobs or ignore the guidance and risk an EEOC enforcement action.”

The EEOC has been undeterred by its losses. It has two high-profile lawsuits alive in the courts. In the first, the EEOC has sued Dollar General on behalf of 8,400 individuals who were denied employment because of felony convictions. The EEOC takes the position that Dollar General failed to prove it has a “business necessity” not to hire twice-convicted drug abusers. In the second case, the EEOC sued on behalf of felons who were fired from their jobs at a BMW manufacturing facility.

…And the war goes on.

Contributing Author

Howard Kastrinsky

Howard Kastrinsky is a partner at King & Ballow, a Meritas member firm, where he is head of the Employment and Discrimination Section....